Gerald Nash (Louth, Labour) | Oireachtas source

Cuckoo funds have mutated and the shot that the Minister has administered will not succeed in stopping them in their tracks. The evidence so far suggests that they will be resistant to the new measures he announced last night. I called in recent times for a meaningful hike in stamp duty as one of a series of targeted measures to do what the entire House seems to say it wants to do, which is to clip the wings of investment funds to ensure a level playing pitch for those who want to shot of owning their own homes. The evidence from the markets over the past 24 hours is telling. If investors feared a 10% hike in stamp duty, they would take their money elsewhere. Instead, the valuation of I-RES REIT, for example, has gone up by an excess of 2% since last night. A rate of 10% is not punitive; it is a puny rate. It says to me that they are not deterred. They will take the move on the chin, absorb the cost, and-or pass it on to already hard-pressed renters who have little security in a legislative context.

I have heard the Minister's defence of the 10% rate at his press conference last night and in his remarks this evening and I am still not persuaded that it ought not to have been set at a higher rate of 15% or 17%. I believe, in the interest of transparency, that he should publish the rationale for arriving at the 10% rate, the rationale from his Department and the advice and forming his decision.

I tabled two amendments that were ruled out of order. The first called for the House to oppose the exemption applied to the bulk purchase of apartments and apartment schemes. The Labour Party does not support this exemption. An apartment is a home when one applies for a mortgage or when one might apply for housing assistance payment, HAP, but it is not a home to be owned and enjoyed by owner-occupiers when it comes to tax advantages enjoyed by investment funds and that have the effect of distorting the market. This takes some explaining for those of us like myself and my colleague, Labour Party housing spokesperson, Senator Rebecca Moynihan, who want to see sustainable, balanced communities encouraged in our cities and major town centres. It really is sad that a home is a home but only until it comes within the grasp of a REIT. Our fear is that what we will see now is a move by investment funds to get a bigger bang for their buck and move en masse to build-to-rent and the lower floor space standards the rules allow for them. That will be bad news for renters and bad news for our society.

In addition, the amendment that was ruled out of order proposed that the stamp duty changes out to have been effective from today, 19 May, and not 20 May, as the Minster proposes in the resolution. Normally, as he knows, when changes such as these are announced on budget day, they are legislated for that very night to ensure that advantage is not taken before the new rules kick in, so why did he choose not to bring this resolution to the Dáil last night when we were expecting to see it, following his press conference after the decision was taken by Cabinet? I fear the midnight oil was burning through the night in lawyers' offices in the docklands with date stamps at the ready to make sure that big sales of tranches of homes kicked off in time to avoid bigger stamp duty bills. I also note there is a three-month window or transition period to allow things to be tied up. Given the seriousness of the situation we are now in, I am not in favour of that approach.

It will come as a surprise to first-time buyers who might have been beaten to the punch by an investment fund to learn that in the past two to three years, four REIT shareholders under the immigrant investor programme have, by virtue of their investment in funds operating in Ireland, qualified for Irish residency. This is confirmed to us in a reply to a parliamentary question from the Minister for Justice. I do not believe this will sit well with most citizens in light of what we know about the activities of some REITs and their impact on the housing market, particularly on first-time buyers.

We need a full review of the tax treatment of these funds. We know they are not, as commercial entities, captured for corporation tax and capital gains tax purposes. We are also aware that they do not pay the universal social charge and PRSI on rental income like the common or garden landlord. How would they? Are the advantages they enjoy a form of unfair State aid? If so, is that anti-competitive? It is a question that ought to be explored further by this House in the coming weeks and in advance of the legislation the Government is committed to introducing shortly to give ultimate effect and bring legal certainty to the measure he is introducing this evening. These measures ought to be explored in much more detail because I cannot find a persuasive argument as to why corporation tax and capital gains tax are not charged on the commercial activities of these organisations. Although they may not accept them, everybody fully understands and can compute the reasons the structures were introduced several years ago but the fact is that, over the past ten years, with one or two minor exceptions, the tax treatment of the funds has gone largely unamended. It is time to radically change the Government’s approach to REITs, IREFs and other institutional investors in Irish property. The time to do it is now. Unfortunately, we cannot support this financial resolution because we do not believe it goes far enough. We cannot support a position whereby apartment complexes and schemes are exempted.

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